Mortgage lenders must abandon their traditional aversion to being “early adopters” of technology if they are to succeed in today’s marketplace, advises mortgage advisory firm STRATMOR Group.

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“As most mortgage industry veterans know, lenders hate to be first. Lenders tend to avoid taking risks, especially when it comes to technology. However, this paradigm must change,” says STRATMOR Senior Partner and CEO Lisa Springer. “The mortgage industry, like Tesla and Apple, must transform the status quo and become forward-thinking and dynamic lenders willing to cater to a new digital era that removes the complexities of getting a mortgage.”

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Springer discusses technology and the borrower experience in STRATMOR’s April 2019 Insights Report, which focuses on the firm’s key takeaways from the Mortgage Bankers Association’s (MBA’s) Technology Conference.

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Springer says that enhancing the borrower experience is driving technology investment, not just from the consumer’s perspective but also from the industry’s. She points out that in his conference session, STRATMOR Senior Partner Garth Graham found that 58 percent of the attendees at the MBA’s Technology Solutions Conference gave “borrower satisfaction” as their primary reason for investing in technology. Running a close second was faster cycle times, a key strategy for improving borrower experience and satisfaction.

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In another survey conducted at the MBA conference, only 12 percent of participants cited “attracting new customers” as a primary business driver. According to Graham, while more than 50 percent of the average $8,600 cost to originate a mortgage is spent on sales-related functions, only two percent is attributed to generating new leads.

“Lenders need to invest more in both marketing and technology to support efforts to drive more business,” Springer says. “If a lender can generate more high-quality leads than competitors, thereby enabling their originators to do more volume, commissions and sales costs can ratchet down to allow lenders to price their loans more competitively. Already in our industry, 80 percent of the volume is done by the top 40 percent of originators, so focusing on how to make them more productive gives lenders the ability to drive down the cost per loan.”

STRATMOR believes lenders should “map out” the entire origination experience, from initial contact through the borrower’s post-close and servicing experience, in order to identify each technical and human interaction that the borrower undergoes throughout the process. The lender can then shore up any gaps to continuously improve that overall experience and retain more borrowers.

“The sustained downturn we are facing is new to many industry leaders, who have never faced this before,” Springer said. “The market now is about stealing share and driving purchase transactions and retaining borrowers in servicing portfolios. So, one key is to have great collaboration tools that enable the whole mortgage ecosystem – borrower, Realtor or referral source, the consumer, the lender and the vendors that support the lender – to all work together to get the transaction closed faster and ultimately more inexpensively.”

Also in the article, STRATMOR Principal Andrew Weiss discusses why some lenders are taking a different route with their loan processing systems (LOS), choosing instead to assemble a customer-focused, end-to-end experience from the best-of-breed parts offered by several vendors and/or by developing components themselves.

“We know it can be done, and if done well lenders can break through some of the traditional cycle-time and customer service barriers,” writes Weiss. However, he cautioned, “assembling a best-of-breed platform from internally-built and vendor-purchased capabilities is not for the faint of heart. It requires a strong commitment to investing in and nurturing a world-class Information technology team.” It also requires a well thought-through, long-term plan – which cannot be created overnight – and management that “will accept the risks and the inevitable bumps in the road for the potential for true competitive advantage.”

In a second article in the report, STRATMOR MortgageSAT director Mike Seminari shares three steps lenders can take now to use technology to drive a better end-to-end loan experience for the borrower. “Many lenders these days are making (or are preparing to make) significant investments to update their digital mortgage tools. There seems to be an industry-wide consensus that this is an important area for each lender to address.”